The following is data from 2010 for the tiny island nati
Question and Solution
The following is data from 2010 for the tiny island nation of Papaya: money supply = 600 million; price level = 2.5; vel
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The following is data from 2010 for the tiny island nation of Papaya: money supply = 600 million; price level = 2.5; velocity of money = 4. Use the quantity theory of money to answer the following questions. a. What is the value of real output (income) in 2010? b. What is the value of nominal GDP in 2010? c. If real output doubled, by how much would the money supply need to change? d. If velocity is constant and Papaya was experiencing a recession in 2010, what impact would an easy money policy have on nominal GDP? e. If the annual GDP growth rate is 8 percent in Papaya, by how much will the money supply need to change in 2011?
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